Watching the back-to-back television commercials of the two 24th District congressional candidates, Republican Abel Maldonado and Rep. Lois Capps, D-Santa Barbara, as they assault viewers with their disingenuous claims about each other is both tiresome and offensive to me. They are both misrepresenting the other’s and their own claims, and I wish we had a better option than one of these two candidates to represent us in Washington.
Unfortunately, there is not.
My sense is that, although both candidates are spinning the facts, Capps’ case is the more egregious.
Looking at the specifics of their respective claims, the Maldonado family business, Agro-Jal, which the Los Angeles Times reported “has co-owned a 6,000-acre Santa Maria farm that grows cauliflower, celery and strawberries ... he (Maldonado) said he was severing his ties to the business, after reports of a battle in tax court over the IRS’ contention that he and his wife owed the government $470,000.”
The Times also noted that “Agro-Jal is also challenging an IRS finding that it underpaid its taxes by $3.6 million between 2006 and 2008. The case is now in settlement discussions.”
“This dispute involves a lot of very complex accounting issues that other small businesses are attempting to navigate on a daily basis,” Maldonado said. “I want this resolved, and the second we get a bill that correctly defines our tax liability, it will be paid.”
Other disputed tax deductions include “renovations to Maldonado’s home and a possible fundraiser for his campaign for state Senate, where he served before becoming lieutenant governor.”
Capps’ television commercials further allege that Maldonado has claimed the use of a private airplane as a business deduction, along with the cost of crates and other packing materials.
The issue with Maldonado boils down to disputed tax deductions, whatever they may be, which are currently being litigated in tax court.
The claims about Maldonado in Capps’ commercials make it appear that he has knowingly filed fraudulent income tax returns.
On the other hand, looking at Maldonado’s commercials about Capps, he asserts that she knowingly failed to report rental income from a room she rented to one of her congressional staffers for the past five years.
So, which one is the worst income tax scofflaw?
In Maldonado’s case, he claimed various deductions that are disputed by the IRS, while Capps has failed to report income for five years — albeit a somewhat nominal amount. The assertions in Capps’ television commercials that make it sound as if Maldonado’s deductions are somehow illegal is completely bogus, such as claiming a deduction for the use of his airplane. Corporate or business airplanes are routinely and legally deducted by many businesses — or, as in Maldonado’s case, writing off various items that may be used by the business, such as the cost of a cooling facility and crates and boxes used to ship produce.
Taxpayers whose returns include deductions for business expenses routinely claim deductions that the IRS may dispute. That’s what IRS audits are for — to “keep taxpayers honest.”
On the other hand, failure to file income tax returns or to report income can result in severe penalties, including the possibility of jail time or, at the very least, significant financial penalties.
My conclusion is that Capps’ failure to report income is a more significant transgression than Maldonado claiming deductions that are disputed by the IRS. The fact that the IRS is in “settlement discussions” with Maldonado supports the contention that they are legal.
Taxes are not funny to most people, but they are often the subject of humor, perhaps to lessen the pain of having to pay them. Following are two observations about taxes by famous people who had a sense of humor.
“The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” — President Ronald Reagan in an Aug. 15, 1986, address to the White House Conference on Small Business (source: Mark Alexander, The Patriot Post, Vol. 04 No. 50).
“I know all those people. I have friendly, social and criminal relations with the whole lot of them.” — Mark Twain in a Jan. 22, 1906, speech at Carnegie Hall on tax evaders (published in Complete Essays of Mark Twain, edited by Charles Neider, 1963).
— Harris R. Sherline is a retired CPA and former chairman and CEO of Santa Ynez Valley Hospital who as lived in Santa Barbara County for more than 30 years. He stays active writing opinion columns and his blog, Opinionfest.com.